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Incentive schemes - good for individuals, less so for teams

At Boodle Hatfield we often help clients introduce incentive schemes for their employees (and indeed I am implementing one today). 

Such schemes are known to improve performance and we have seen them being phenomenally successful for clients. An interesting new paper, however, suggests that the effects of incentive schemes are much more limited where production is carried out in teams.

The paper looked at productivity in differing retail settings. Where work was carried out individually, incentives generated an approximately 19% increase in productivity. There was, however, no material effect where the incentives were introduced in a team setting.

Intriguingly the reason for the difference is that those working in teams do not appear to need further incentives beyond the 'social incentives' that they already have. 

Indeed for teams without formal incentives, the social incentives are much stronger, boosting the team's productivity to the level of teams with incentives. The research suggests that the existence of formal incentives crowded out these less formal ways of motivating staff. 

The findings are specific to retail, but make for interesting reading for anyone looking to increase the productivity of their employees. 

The full paper can be found here: http://facultyresearch.london.edu/docs/The_impact_of_incentives_on_teams_-_Jan_2022.pdf

this is not because incentives do not work in teams –on the contrary, they strongly boost productivity via effort complementarity– but because teams in our setting do not need them –teams without incentives display larger social incentives than teams with them

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